Concerns Arise Over Inheritance Tax Impacts for Berry Bros Families

The families of the long-established London wine merchant Berry Bros & Rudd have expressed apprehension regarding the Labour government’s proposed alterations to the inheritance tax system, believing these changes could jeopardize their ownership of the 376-year-old company.

Emma Fox, the chief executive of the business, remarked that a proposed 50 percent reduction in business property relief—which permits family-run enterprises to transfer property without incurring tax liabilities—represents a significant challenge for the esteemed institution based in St James’s.

Remaining under the ownership of the Berry and Rudd families, the company boasts approximately £90 million in assets, which include its main office on Pall Mall, Europe’s largest fine wine storage facility located in Kent, and a half stake in the Hambledon Vineyard in Hampshire.

Emily Rae, the chief financial officer of Berry Bros, indicated that this relief has been crucial for ensuring the business stays within the family. She stated, “We now need to reconsider our balance sheet strategies, future investments, and structural considerations moving forward for the family’s benefit.”

Fox, who has previously held executive roles at Asda and Bass, noted that the budget decisions could have significant repercussions on the company’s investment strategy: “We refer to it as patient capital because we do not anticipate quick returns. Our focus is on long-term investments for future generations. The budget announcement was indeed a substantial setback and will necessitate new operational approaches for us.”

Berry Bros is not alone in its concerns, joining a growing roster of family businesses reacting to the budget changes. Notably, Sir James Dyson labeled the alteration of the relief as a “family death tax” in a recent commentary, stating it could lead to the demise of established family firms and eliminate incentives for starting new enterprises.

These remarks coincide with the release of Berry Bros’ financial results for the year ending in March, which indicated a decline of over 50 percent in headline earnings (Ebitda), dropping to £10.1 million. The firm recorded a pre-tax loss of £2.2 million, compared to a profit of £11.9 million in the previous year, as it grapples with what it describes as “incredibly tough market conditions.”

This decline is largely attributed to a planned £27 million investment strategy, which includes a joint venture with the port house Symington to acquire Hambledon and an investment in the Cotswolds Distillery. Additionally, the company experienced a notable slowdown in its US business, Hotaling.

The San Francisco-based spirits importer and distributor, responsible for about 30 percent of Berry Bros’ revenues, has faced a significant drop in post-pandemic spirit sales across the United States, a trend impacting the wider industry as consumers move past pandemic-driven buying habits.

Despite these challenges, Fox communicated that Hotaling has demonstrated positive signs of recovery over the past six months, and she anticipates that the company will outperform its competitors as the market begins to rebound.

The core business, which involves fine wine retail and storage, experienced modest single-digit growth, characterized by more customers making more frequent purchases. Additionally, revenues from wine storage—where collectors pay a premium for temperature-controlled conditions—rose by over 25 percent compared to the previous year. The business has also successfully completed its inaugural fine wine auction, exploring new sales channels. The events and entertainment division saw a growth of 16 percent.

The board has approved a dividend of £13.10 per share, an increase from 794p in the previous financial year, a decision that chair Lizzy Rudd stated reflects the “sustainable underlying growth in the business.”

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